Is MKSI A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of MKS Instruments, Inc. (NASDAQ:MKSI).

Is MKSI a good stock to buy now? MKS Instruments, Inc. (NASDAQ:MKSI) investors should be aware of an increase in support from the world’s most elite money managers in recent months. MKS Instruments, Inc. (NASDAQ:MKSI) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 32 hedge funds in our database with MKSI positions at the end of the second quarter. Our calculations also showed that MKSI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Ken Fisher of Fisher Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the recent hedge fund action regarding MKS Instruments, Inc. (NASDAQ:MKSI).

Do Hedge Funds Think MKSI Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MKSI over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Is MKSI A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in MKS Instruments, Inc. (NASDAQ:MKSI), worth close to $107.9 million, amounting to 1.2% of its total 13F portfolio. On Royce & Associates’s heels is Fisher Asset Management, led by Ken Fisher, holding a $59.8 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish comprise Tim Curro’s Value Holdings LP, Renaissance Technologies and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Value Holdings LP allocated the biggest weight to MKS Instruments, Inc. (NASDAQ:MKSI), around 12.19% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 1.16 percent of its 13F equity portfolio to MKSI.

Now, key money managers have jumped into MKS Instruments, Inc. (NASDAQ:MKSI) headfirst. Renaissance Technologies, created the most outsized position in MKS Instruments, Inc. (NASDAQ:MKSI). Renaissance Technologies had $19.8 million invested in the company at the end of the quarter. Joshua Nash’s Ulysses Management also made a $1.3 million investment in the stock during the quarter. The other funds with brand new MKSI positions are Greg Eisner’s Engineers Gate Manager, Jinghua Yan’s TwinBeech Capital, and Ran Pang’s Quantamental Technologies.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MKS Instruments, Inc. (NASDAQ:MKSI) but similarly valued. We will take a look at OGE Energy Corp. (NYSE:OGE), National Retail Properties, Inc. (NYSE:NNN), Kilroy Realty Corp (NYSE:KRC), Credit Acceptance Corp. (NASDAQ:CACC), Smartsheet Inc. (NYSE:SMAR), Dada Nexus Limited (NASDAQ:DADA), and DCT Industrial Trust Inc. (NYSE:DCT). This group of stocks’ market valuations match MKSI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OGE 22 215851 -3
NNN 16 122717 -1
KRC 19 327802 -1
CACC 29 673470 6
SMAR 45 1661963 -2
DADA 17 113051 0
DCT 21 222561 21
Average 24.1 476774 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $313 million in MKSI’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 16 bullish hedge fund positions. MKS Instruments, Inc. (NASDAQ:MKSI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MKSI is 70.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on MKSI as the stock returned 36.9% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.